Antidilutive
Barron's Finance & Investment Dictionary:
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Antidilutive
effect on Earnings Per Share assuming conversion of common stock equivalents, when the effect is to increase, rather than decrease, earnings per share. For example, if a convertible bond was converted into common stock, net earnings would increase by the amount of bond interest saved, and the number of shares outstanding would increase by the conversion ratio. If the former (the numerator) divided by the latter (the denominator) resulted in increased earnings per share, the effect of the conversion would be antidilutive. Conservative accounting principles require that earnings per share (EPS) not be inflated by antidilutive effects.
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Investopedia Financial Dictionary:
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Antidilutive
A term describing the effects of securities retirement, securities conversion or corporate actions (such as acquisitions made through the issuance of common stock or other securities) on earnings per common share (EPS), where EPS is increased for shareholders.
A transaction is considered to be antidilutive if its effect is to increase the amount of EPS, either by lowering the share count or increasing earnings.
A second use of the term refers to ownership rights, whereby existing shareholders in a certain class of shares have rights to purchase additional shares when there is a new issuance of securities that would otherwise reduce the ownership percentage of existing holders. This is called an anti-dilution provision.
Investopedia Says:
Although most commonly used in reference to convertible securities whose exercise would have the effect of increasing EPS, the use of the term "antidilutive" has become much more comprehensive.
For example, if Company A acquires Company B by using its common stock, but the earnings of Company B add more to EPS than the common stock issued, it is said to be an antidilutive acquisition.
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Barron's Finance & Investment Dictionary
Dictionary of Finance and Investment Terms. Copyright © 2010 by Barron's Educational Series, Inc. All rights reserved.
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Fully Diluted Earnings Per (Common) Share
(finance term)
Common Stock Equivalent
(finance term)